WATA ups 1H PAT by 32% to Rs. 409 m despite tough 3Q for tea

Tuesday, 27 January 2015 00:40 - - {{hitsCtrl.values.hits}}

Watawala Plantations Plc reported revenues of Rs. 5.3 b for the nine months ended 31 December 2014 (9MFY15), up 16.6% YoY. Net profit or PAT for 9MFY15 amounted to Rs. 409 m, against Rs. 311 m in the same period last year. WATA was able to post strong bottom line performance in a challenging environment for the plantation sector due to better than expected performance in palm oil. Profit for the 3rd quarter (3QFY15) amounted to Rs. 147 m, down 30.9% YoY due to challenges in the Tea sector which was adversely affected by heavy rains.

Palm oil contributed Rs. 593 m to the group bottom line in 9MFY15 which helped WATA to cover its losses in the tea and rubber sectors. Profit for3QFY15 alone amounted to Rs. 172 m, a growth of 23.2% YoY. Revenue for 9MFY15 amounted to Rs. 1.2 b, up 9.1% YoY. The growth in revenue is attributed to 6.3% YoY increase in crop which amounted to 6.94m kg, and a19.9% YoY increase in NSA. The average NSA for 9MFY15 was Rs. 163 per kg. We attribute the increase in crop to better yield as a result of good agri practices and new fields yielding fruit. Palm oil revenue for 3QFY15 amounted to Rs. 404 m, up 12.7% YoY. Tea segment, the largest revenue contributor which accounted for over 67.9% of the total revenue, increased 22.4% YoY to Rs. 3.6 b in 9MFY15, mainly on the back of improved volumes. Weather conditions were favorable for tea during 1QFY15, but not so much in 2QFY15 and 3QFY15. For 9MFY15, own crop was up 7.6% to 4.98m kg, and bought crop increased 11.7% YoY to 2.96m kg. The NSA for 9MFY15 stood at Rs. 403 per kg, down 3.6% from same period last year. Instability in key export markets such as CIS, and the Middle East has put pressure on auction prices. For 9MFY15, the tea segment had made a loss of Rs. 210 m, compared to a loss of Rs. 197 m in 9MFY14. 3QFY15 has been a very challenging period with production volumes being affected by inclement weather and NSA being hit by weak demand at the auction. 3QFY15 tea loss amounted to Rs. 11 m against a profit of Rs. 37 m in 3QFY14. Revenue for 3QFY15 amounted to Rs. 1.1 b, down 3.1% YoY, mainly on account of a 10.4% YoY dip in crop. Export segment Export sector revenues were driven up on the back of value added teas sold at a higher price, compared to mainly bulk orders in 9MFY14. Enhanced volumes on herbs and black teas have contributed towards a revenue of Rs. 407 m in 9MFY15, up 11.7% YoY. PAT on export amounted to Rs. 20 m in 9MFY15, against Rs. 16 m recorded in the same period last year. Rubber segment The rubber segment was hard hit by the 25% YoY dip in average NSA which stood at Rs. 266 per kg in 9MFY15 compared to Rs. 373 per kg in 9MFY14. Revenue was further impacted by a 38.1% YoY drop in volumes. Cultivation extent of rubber was reduced by 20.1% from 520 ha in this year to 651 ha in last year. The increase number of wet days also had a negative impact on tapping and yield. Rubber revenue amounted to Rs. 63 m in 9MFY15, down 43.8% YoY. The segment made a net loss of Rs. 63 m in9MFY15, compared to a loss of Rs. 10 m in the same period last year. Outlook Overall, WATA posted strong results for 9MFY15, mainly driven by palm oil. The company expects the palm oil segment to continue its strong performance in 4QFY15. It is mindful of the demand side issues with buying at the auctions slowing down due to issues in key Ceylon Tea markets in CIS and the Middle East. With its long-term agri practices in place, it is reasonably confident that it will overcome the difficult environment expected for the rest of the year.